American Tower (AMT) Hikes Quarterly Dividend: Time to Hold?
American Tower Corporation AMT recently announced that its board of directors has approved a quarterly dividend payment of $1.01. This represents a sequential hike of 6.3% from the prior dividend of 95 cents.
Based on the hiked rate of $1.01 for the quarter, the annual dividend comes to $4.04 per share. This new dividend will be paid on Jan 14, 2020, to shareholders of record on Dec 27, 2019. At this new rate, the annualized yield comes at 1.9%, based on the stock’s closing price of $209.69 on Dec 10.
The move indicates the tower REIT’s commitment to reward shareholders through higher dividend payouts. Earlier, the company had increased its third-quarter dividend by 3.2%. In fact, the company has consistently increased its quarterly dividends since 2012. Through this period, its average annual dividend per share witnessed growth of more than 20%.
Moreover, American Tower’s ability to sustain the hiked dividends depends on its funds from operations (FFO) growth and payout ratio. The company’s current payout ratio is 43.8%. In addition, its funds from operations per share growth is projected at 16.3% for the next five years, ahead of the industry’s average of 5.2%.
American Tower has a disciplined capital-allocation strategy, through which the company is adding incremental scale via acquisitions and handsomely rewarding shareholders.
In the first nine months of 2019, the company acquired 582 communications sites in the United States, Colombia, Mexico, Paraguay and Peru, for an aggregate price of $183.8 million. Back home, in August, it acquired nearly 400 U.S towers and other related property interests for $483.9 million. Further, it is set to deliver record level of international macro-tower construction in the ongoing year.
Through these efforts, American Tower continues to capitalize on the demand for denser mobile networks resulting from rise in mobile-data usage as well as higher investments in 4G and 5G technology.
However, the accelerated Indian carrier consolidation-driven churn due to the bankruptcy of Aircel continues to affect its property revenues in the Asia segment. In addition, management expects carrier consolidation in India to affect the company’s consolidated property revenues by nearly $178 million in 2019.
Shares of this Zacks Rank #3 (Hold) company have rallied 25.8%, outperforming the industry’s growth of 13% over the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Notably, solid dividend payouts remain arguably the biggest attraction for REIT investors as the U.S. law requires these companies to distribute 90% of the annual taxable income in the form of dividends to shareholders. Apart from American Tower, some other REITs, which announced dividend hikes recently, are SL Green Realty Corp. SLG, Alexandria Real Estate Equities ARE and Agree Realty Corporation ADC.
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